SILICON VALLEYINDUSTRIAL MARKET

RESEARCH 2Q 2020

© NEWMARK KNIGHT FRANK | 2020 RESEARCH | 1

INDUSTRIAL MARKET ANALYSIS

Asking Rent & Availability

Net Absorption (Square Feet, Millions)

MARKET SUMMARYCurrent Quarter Year Ago PeriodIND WHS IND WHS

Total Availability Rate 4.6% 9.0% 3.0% 9.7%

Quarterly Net Absorption -634K SF -185K SF -118K SF -598K SF

Quarterly Gross Absorption 760K SF 458K SF 577K SF 792K SF

Total NNN Asking Rent $1.29/SF $1.04/SF $1.30/SF $0.96/SF

Under Construction 1.9M SF 815K SF 1.3M SF 815K SF

Deliveries 0 SF 0 SF 0 SF 0 SF

-1.2

-0.8

-0.4

0.0

0.4

0.8

2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18 2Q19 2Q20

0.0%

2.0%

4.0%

6.0%

8.0%

10.0%

$0.25

$0.50

$0.75

$1.00

$1.25

$1.50

2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18 2Q19 2Q20

Average Asking Rent ($/SF) Availability (%)

WAREHOUSE MARKET ANALYSIS

Asking Rent & Availability

Net Absorption (Square Feet, Millions)

-1.2

-0.8

-0.4

0.0

0.4

0.8

1.2

2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18 2Q19 2Q20

0.0%

3.0%

6.0%

9.0%

12.0%

15.0%

$0.00

$0.20

$0.40

$0.60

$0.80

$1.00

2Q11 2Q12 2Q13 2Q14 2Q15 2Q16 2Q17 2Q18 2Q19 2Q20

Average Asking Rent ($/SF) Availability (%)

SUBMARKET BREAKDOWNIndustrial MarketAll the submarkets were in the negative this quarter, but Fremont was the biggest contributor, singlehandedly putting up negative 517,580 square feet, over 80% of the total. Two completed buildings in Pacific Commons South added over 343,000 square feet in Bayside, as well as an enormous sublease of nearly 153,000 square feet at 800 Corporate Way. These were the largest factors. Amazon leasing 388,240 square feet in the Oak Creek submarket was one of the lone shining lights, although it did only contribute to gross absorption, not net. The Trimble South submarket in San Jose also fared well, with nearly 94,761 square feet added to the gross absorption, with the majority coming from a renewal of 50,765 square feet by Encore Industries.

RENEWALS RELIEVE PARTIAL PRESSURE OF PANDEMICWhile the industrial market was not immune to the effects of the pandemic, it appears more asymptomatic than not. While every submarket did post a negative net absorption, with the total negative absorption hitting an astonishing negative 634,920 square feet, there is more to the story. Amazon continued to expand its footprint, and there was an influx of renewals this quarter, resulting in a gross absorption of 760,141 square feet that was the highest since the fourth quarter of 2018. Asking rates did fall $0.03/SF to an average of $1.29/SF.

The warehouse market did not fare quite as well, but still put up decent numbers considering the circumstances. Net absorption dropped to negative 185,392 square feet, with two large subleases at the Milpitas Business Center being the main culprits. Gross absorption was also nearly less than 1/3 of the first quarter of the year, putting up a meager 458,618 square feet total. The vacancy rate jumped a full point, up to 9.0% this quarter due to the overall low activity. Despite this, asking rates continued to rise, with an increase of $0.02/SF to an average of $1.04/SF, a new historical high.

RESEARCH | 2

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

SELECT INDUSTRIAL LEASE / OWNER-USER TRANSACTIONSTenant Building(s) Submarket Type Square Feet

Amazon 205 McCarthy Blvd Milpitas (East 880) Direct 388,240

Bay Advanced Technologies 8100 Central Avenue Newark Renewal 70,575

Encore Industries 597 Brennan Street San Jose (Trimble South) Renewal 50,765

SELECT WAREHOUSE LEASE / OWNER-USER TRANSACTIONSTenant Building(s) Submarket Type Square Feet

KZ Kitchen Cabinet & Stone 901 Cadillac Court Milpitas (East 880) Renewal 120,600

Amazon 615 King Road San Jose (Brokaw South) Direct 77,608

Scholastic Book Fairs 42001 Christy Street Fremont (Auto Mall North) Renewal 67,920

Pacific Coast Logistix 2520 Zanker Road San Jose (Trimble South) Sublease 55,600

Jones Lang LaSalle Americas 927 Wrigley Way Milpitas (East 880) Renewal 46,000

SELECT INDUSTRIAL INVESTMENT SALE TRANSACTIONSBuilding(s) Submarket Reported Sale Price Reported $/RSF Square Feet

901 Page Ave Fremont (Mission South) $110,000,000 $217.18 506,490

180-186 E Sunnyoaks Ave Campbell $13,400,000 $269.46 49,729

4200 Business Center Drive Fremont (Mission North $8,600,000 $184.59 46,589

SELECT WAREHOUSE INVESTMENT SALE TRANSACTIONSBuilding(s) Submarket Reported Sale Price Reported $/RSF Square Feet

660 N King Road San Jose (Brokaw South) $9,200,000 $230.00 40,000

© NEWMARK KNIGHT FRANK | 2020

Warehouse MarketFremont, Milpitas and San Jose were the only three submarkets that had any contribution to the gross or net absorption. Both Fremont and Milpitas had negative net absorption, with negative 115,234 and 160,561 square feet, respectively. Milpitas had two subleases come to market in the East 880 submarket, totaling nearly 150,000 square feet.

There was a substantial lease at 901 Cadillac Court in the same submarket, with 120,600 square feet being leased. Fremont was the most affected by the Warm Springs submarket, with 87,592 square feet added.

San Jose was the lone city in the positive, with 90,403 square feet net absorption and 224,098 square feet gross. The biggest contributors for these numbers were two renewals and a lease extension in the Trimble South submarket of San Jose.

SIGNIFICANT TRANSACTIONSAmazon continues to expand its footprint in the Silicon Valley, leasing over 450,000 square feet across the industrial and warehouse markets. For industrial, Amazon leased 388,240 square feet at 205 McCarthy Boulevard in the Milpitas East 880 submarket. On the warehouse side of things, Amazon leased 77,608 square feet at 616 King Street in the Brokaw South submarket of San Jose.

Beyond the Amazon deals, renewals were the name of the game this quarter, making up five out of the 6 remaining top deals. For industrial,

Bay Advanced Technologies renewed their lease at 8100 Central Ave for 70,575 square-feet in Newark, and Encore Industries renewed 50,765 square-feet at 597 Br ennan Street in San Jose.

In the warehouse market, KZ Kitchen Cabinet & Stone had the largest lease of the quarter, renewing 120,600 square feet at 901 Cadillac Court in Milpitas. Jones Lang LaSalle also partially renewed 46,000 square feet in the same submarket at 927 Wrigley Way. Rounding out the top deals was a sublease transaction by Pacific Coast Logistix at 2520 Zanker Road and Scholastic Book Fairs renewing 67,920 square feet at 42001 Christy Street.

Investments this quarter were down, but were buoyed by a large investment sale at 901 Page Ave in Fremont, where Morgan Stanley purchased the 506,490 square-foot location that Tesla is currently leasing for 110 million dollars, or $217/SF. Beyond that, the largest sale was at 180 Sunnyoaks Ave in Campbell, where Robinson Oil purchased 49,729 square-feet for 13.4 million or $270/SF

Trending in the opposite direction, three significant subleases were added back on to the market this quarter, totaling over 300,000 square feet. In the warehouse market, both subleases were in Milpitas, with Flextronics subletting its 100,103-square-foot space at 901 Wrigley Way, and Rat Pack putting its 48,058-square-foot location at 881 Wrigley Way back to the market. For Industrial, Orchard Therapeutics sublet its 152,675-square-foot space at 800 Corporate Way.

RESEARCH | 3

INDUSTRIAL SUBMARKET STATISTICS

Total Inventory

(RSF)

TotalAvailability

(SF)

SubleaseAvailability

(SF)

Total Availability

Rate

Qtr Gross Absorption

(RSF)

Qtr Net Absorption

(RSF

YTD Net Absorption

(RSF)

Total NNNAsking Rent(Price/SF)

Campbell 1,007,117 30,134 0 2.99% 7,717 -7,244 -6,091 $1.74

Fremont 12,507,815 927,333 201,779 9.03% 23,730 -517,580 47,981 $1.18

Mission South 2,532,800 16,000 0 0.63% 7,271 7271 44,661 $1.10

Warm Springs 2,575,061 38,427 165,475 7.92% 0 -152,995 132,705 $1.24

Mission North 2,130,490 99,580 19,600 5.59% 0 0 -45,894 $1.17

Bayside 1,332,880 508,142 0 38.12% 0 -343203 0 $1.13

Auto Mall North 3,936,584 265,184 16,704 7.16% 16,459 -28,653 -83,491 $1.24

Los Gatos 63,378 0 0 0 0 0 13,244 $0.00

Milpitas 3,666,631 44,005 136,632 4.93% 425,145 0 477,300 $1.14

East 880 2,737,527 44,005 0 1.61% 36,905 0 26,690 $1.06

Oak Creek 929,104 0 136,632 14.71% 388240 0 450,610 $1.15

Mountain View 2,385,548 103,482 11,800 4.83% 4,341 -40,174 -7,332 $3.10

Central 1,263,031 50,382 10,000 4.78% 0 -16,674 17,530 $3.24

Shoreline 454,826 0 0 0.00% 0 0 0 $0.00

Middlefield 667,691 53,100 1800 8.22% 4,341 -23,500 -24,862 $2.88

Newark 4,116,675 106,842 5,077 2.72% 70,576 -21,150 167,685 $1.35

San Jose 17,686,767 563,818 47,972 3.46% 148,447 -4,733 -23,161 $1.17

North 726,459 19,248 0 2.65% 0 0 0 $1.50

TrimBMe South 3,343,717 125,564 31,984 4.71% 94,761 29,124 -327 $1.31

Int’l Business Park 1,292,375 6,030 0 0.47% 5,300 -6030 58,376 $1.25

Brokaw South 4,960,392 100,044 10800 2.23% 14,328 -28,096 -29,600 $0.94

Central 6,665,229 286,782 5,188 4.38% 27,770 269 -48,122 $1.10

South 698,595 26,150 0 3.74% 6,288 0 -3,488 $1.57

Santa Clara 11,523,956 283,137 23,590 2.66% 74,378 -14,471 13,048 $1.39

Central Expy N 656,668 79920 4774 12.90% 0 0 0 $0.00

101 North 4,367,492 54,299 4,762 1.35% 34,902 -13,540 23,209 $1.27

101 South 5,314,829 68,998 9280 1.47% 18,822 3,002 43,741 $1.33

Central Expy S 1,184,967 79,920 4,774 7.15% 20,654 -3,933 -53,902 $1.50

Sunnyvale 2,708,890 44,879 3,872 1.80% 5,807 -29,568 16,670 $1.57

Peery Park 200,066 0 0 0.00% 0 0 0 $0.00

Moffett Park 43,500 0 0 0.00% 0 0 0 $0.00

The Woods 1,025,415 37,614 3,872 4.05% 5,807 -29,568 31,245 $1.49

Oakmead 536,653 3,240 0 0.60% 0 0 0 $0.00

South Central 903,256 4,025 0 0.45% 0 0 -14,575 $2.20

Silicon Valley 55,666,777 2,103,630 430,722 4.55% 760,141 -634,920 699,344 $1.29

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

© NEWMARK KNIGHT FRANK | 2020

RESEARCH | 4

WAREHOUSE SUBMARKET STATISTICS

Total Inventory

(RSF)

TotalAvailability

(SF)

SubleaseAvailability

(SF)

Total Availability

Rate

Qtr Gross Absorption

(RSF)

Qtr Net Absorption

(RSF)

YTD Net Absorption

(RSF)

Total NNNAsking Rent(Price/SF)

Fremont 10,388,229 535,123 120,835 5.15% 67,920 -115,234 -956,936 $1.00

Mission South 2,922,894 24,626 0 0.84% 0 0 -46,988 $1.15

Warm Springs 865,410 238,592 120,835 27.57% 0 -87,592 -95,096 $0.93

Mission North 450,801 35,011 0 7.77% 0 0 0 $1.25

Bayside 1,778,225 0 0 0.00% 0 0 0 $0.00

Auto Mall North 4,370,899 236,894 0 5.42% 67920 -27,642 -814,852 $0.95

Milpitas 5,250,868 791,119 310,834 15.07% 166,600 -160,561 23,223 $0.95

East 880 5,143,518 791,119 310,834 15.38% 166,600 -160,561 23,223 $0.95

Oak Creek 107,350 0 0 0.00% 0 0 0 $0.00

Newark 4,179,812 1,019,154 0 24.38% 0 0 219,661 $1.03

San Jose 15,006,434 740,905 348,039 4.94% 224,098 90,403 11,930 $1.13

Trimble South 3,714,113 286,847 91,202 7.72% 140,721 12,795 82,516 $1.07

Int’l Business Park 1,182,505 105536 83,914 8.92% 0 0 -18,058 $1.21

Brokaw South 3,914,781 152,688 83,914 3.90% 77,608 77,608 -43,312 $1.08

Central 6,195,035 195,834 89,009 3.16% 5,769 5,769 -9,216 $1.20

Santa Clara 2,679,811 275,118 60,500 10.27% 0 0 -214,740 $0.99

101 North 612,271 155,500 0 25.40% 0 0 -188,000 $1.00

101 South 1,410,872 26,740 0 1.90% 0 0 -20240 $0.75

Central Expy S 656,668 92,878 60,500 14.14% 0 0 -6,500 $1.05

Sunnyvale 1,289,064 136,972 41,200 10.63% 0 0 0 $1.26

Peery Park 113,074 0 0 0.00% 0 0 0 $0.00

Moffett Park 613,184 0 0 0.00% 0 0 0 $0.00

South Central 562,806 136,972 41,200 24.34% 0 0 0 $1.26

Silicon Valley 38,794,218 3,498,391 881,408 9.02% 458,618 -185,392 -916,862 $1.04

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

© NEWMARK KNIGHT FRANK | 2020

RESEARCH | 5

HISTORICAL INDUSTRIAL NET ABSORPTION

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Campbell -11,512 7,931 -20,681 -9,006 11,278 3,162 3,162 -7,244

Fremont -70,575 133,240 -262,528 -57,729 42,126 -78,279 -78,279 -517,580

Los Gatos 0 0 0 0 0 0 0 0

Milpitas 6,187 313,042 -10,278 -33,444 -134,940 360,457 360,457 0

Mountain View -12,558 14,378 -30,046 14,926 145 3,971 3,971 -40,174

Newark -42,087 19,854 -29,642 20,799 -86,222 -21,200 -21,200 -21,150San Jose -81,252 4,369 -22,882 -11,123 -21,281 -380,557 -380,557 -4,733Santa Clara 14,249 -64,964 1,827 -40,188 -31,741 -41,485 -41,485 -14,471Sunnyvale 14,330 10,000 -9,962 -2,110 -5,176 0 0 -29,568Silicon Valley -183,218 437,850 -384,192 -117,875 -225,811 -153,931 -153,931 -634,920

HISTORICAL INDUSTRIAL GROSS ABSORPTION

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Campbell 0 7,931 5,600 11,200 26,472 10,550 10,550 7,717

Fremont 47,134 227,109 40,855 114,148 120,973 91,495 91,495 23,730

Los Gatos 0 0 0 0 0 0 0 0

Milpitas 36,231 323,596 44,805 15,710 20,621 365,754 365,754 425,145

Mountain View 10,196 22,337 2,640 43,591 26,034 26,931 26,931 4,341

Newark 24,300 26,820 174,693 70,260 65,437 1,789 1,789 70,576

San Jose 210,842 215,729 181,862 202,138 186,545 93,904 93,904 148,447

Santa Clara 89,604 193,803 35,576 103,559 75,495 64,536 64,536 74,378

Sunnyvale 21,248 10,000 0 16,090 0 0 0 5,807

Silicon Valley 439,555 1,027,325 486,031 576,696 521,577 654,959 654,959 760,141

HISTORICAL INDUSTRIAL AVAILABILITY RATES

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Campbell 2.44% 1.38% 3.47% 3.94% 2.82% 1.62% 1.62% 2.99%

Fremont 3.89% 2.73% 4.79% 5.29% 4.93% 5.63% 5.63% 9.03%

Los Gatos 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 0.00%

Milpitas 9.98% 0.27% 0.59% 1.62% 5.75% 5.50% 5.50% 4.93%

Mountain View 3.91% 3.81% 5.12% 4.32% 4.31% 3.78% 3.78% 4.83%

Newark 1.86% 1.38% 2.28% 1.79% 3.80% 2.88% 2.88% 2.72%

San Jose 3.08% 3.17% 3.19% 3.07% 3.03% 3.38% 3.38% 3.46%

Santa Clara 0.84% 1.36% 1.22% 1.57% 1.85% 2.19% 2.19% 2.66%

Sunnyvale 1.48% 1.11% 1.22% 1.01% 1.20% 1.21% 1.21% 1.80%

Silicon Valley 3.07% 2.28% 2.89% 3.02% 3.39% 3.59% 3.59% 4.55%

HISTORICAL INDUSTRIAL NNN ASKING RENTS

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Campbell $2.22 $1.92 $1.84 $1.75 $1.74 $1.85 $1.85 $1.74

Fremont $1.23 $1.14 $1.16 $1.13 $1.65 $1.12 $1.12 $1.18

Los Gatos - - - - - - - -

Milpitas $0.96 $1.31 $1.16 $1.35 $1.18 $1.17 $1.17 $1.14

Mountain View $3.62 $3.79 $3.53 $3.04 $3.07 $3.25 $3.25 $3.10

Newark $1.69 $0.00 $1.07 $1.02 $1.20 $1.61 $1.61 $1.35

San Jose $1.07 $1.07 $1.12 $1.13 $1.16 $1.10 $1.10 $1.17

Santa Clara $1.41 $1.60 $1.59 $1.29 $1.52 $1.43 $1.43 $1.39

Sunnyvale $2.17 $2.26 $1.94 $1.43 $1.67 $1.55 $1.55 $1.57Silicon Valley $1.31 $1.46 $1.44 $1.30 $1.49 $1.32 $1.32 $1.29

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

© NEWMARK KNIGHT FRANK | 2020

RESEARCH | 6

HISTORICAL WAREHOUSE NET ABSORPTION

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Fremont 101,226 -849,988 -474,845 -252,477 823,437 244,190 256,325 -115,234

Milpitas 0 0 136,923 -74,822 -110,042 0 -156,344 -160,561

Newark -34,052 0 -477,642 12,280 0 0 -384,915 0

San Jose -1,244 17,433 -68,470 -278,701 34,992 -84,979 -120,416 90,403

Santa Clara 19,500 -52,000 0 -4200 27,938 -10,193 1,877 0

Sunnyvale 0 0 0 0 0 0 -136,972 0

Silicon Valley 85,430 -884,555 -884,034 -597,920 776,325 149,018 -540,445 -185,392

HISTORICAL WAREHOUSE GROSS ABSORPTION

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Fremont 295,196 61,551 154,218 46,665 1,060,263 422,182 722,902 67,920

Milpitas 31,518 0 136,923 214,169 0 143,024 0 166,600

Newark 0 0 0 134,279 0 0 46,202 0

San Jose 289,450 212,650 656,672 397,243 509,177 293,184 447,107 224,098

Santa Clara 19,500 0 27,865 0 95,831 71,831 22,993 0

Sunnyvale 0 0 0 0 0 0 126,788 0

Silicon Valley 635,664 274,201 975,678 792,356 1,665,271 930,221 1,365,992 458,618

HISTORICAL WAREHOUSE AVAILABILITY RATES

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Fremont 1.61% 9.87% 14.11% 16.55% 8.58% 7.42% 3.71% 5.15%

Milpitas 9.96% 9.96% 7.35% 8.78% 10.87% 10.59% 11.47% 15.07%

Newark 0.87% 1.28% 13.46% 13.16% 13.16% 13.16% 22.57% 24.38%

San Jose 2.38% 2.27% 3.28% 4.94% 4.71% 4.67% 5.09% 4.94%

Santa Clara 9.08% 11.08% 11.08% 11.24% 10.17% 10.25% 10.18% 10.27%

Sunnyvale 0.00% 0.00% 0.00% 0.00% 0.00% 0.00% 10.63% 10.63%

Silicon Valley 3.49% 5.77% 8.23% 9.69% 7.67% 7.31% 7.96% 9.02%

HISTORICAL WAREHOUSE NNN ASKING RENTS

3Q18 4Q18 1Q19 2Q19 3Q19 4Q19 1Q20 2Q20

Fremont $0.90 $0.99 $0.92 $0.96 $0.96 $0.97 $0.96 $1.00

Milpitas $1.02 $1.02 $1.02 $1.03 $1.04 $1.03 $1.04 $0.95

Newark $0.85 $0.85 $0.90 $0.90 $0.89 $0.89 $1.02 $1.03

San Jose $1.00 $0.99 $0.98 $1.00 $0.97 $0.96 $1.07 $1.13

Santa Clara $0.80 $0.80 $0.80 $0.83 $1.22 $0.94 $0.94 $0.99

Sunnyvale - - - - - - - $1.26

Silicon Valley $0.98 $0.98 $0.95 $0.96 $0.98 $0.96 $1.02 $1.04

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

© NEWMARK KNIGHT FRANK | 2020

NEWMARK KNIGHT FRANK3055 Olin Avenue, Suite 2200San Jose, CA 95128408.727.9600Corporate CA RE #: 00832933

WING LEEResearch Manager408.982.8427 wclee@ngkf.com

RESEARCH | 7

Newmark Knight Frank has implemented a proprietary database and our tracking methodology has been revised. With this expansion and refinement in our data, there may be adjustments in historical statistics including availability, asking rents, absorption and effective rents. Newmark Knight Frank Research Reports are available at www.ngkf.com/research

All information contained in this publication is derived from sources that are deemed to be reliable. However, Newmark Knight Frank (NKF) has not verified any such information, and the same constitutes the statements and representations only of the source thereof, and not of NKF. Any recipient of this publication should independently verify such information and all other information that may be material to any decision that recipient may make in response to this publication, and should consult with professionals of the recipient’s choice with regard to all aspects of that decision, including its legal, financial, and tax aspects and implications. Any recipient of this publication may not, without the prior written approval of NGKF, distribute, disseminate, publish, transmit, copy, broadcast, upload, download, or in any other way reproduce this publication or any of the information it contains.

MICKEY MORANResearch Analyst408.982.8435 mickey.moran@ngkf.com

MILES WHITTEMOREResearch Analyst408.987.4105 miles.whittemore@ngkf.com

2Q 2020 SILICON VALLEY INDUSTRIAL MARKET

© NEWMARK KNIGHT FRANK | 2020